Billing plans lift Best Buy sales 3.4%

Solid sales of televisions and mobile phones in stores and online drove better than expected top line growth at Best Buy during the holidays with details on profitability yet to come.

The company said same-store sales grew 3.4% in the United States over the holidays (Nov.-Dec.) as it sold more large-screen TVs and mobile phones.

“A compelling merchandise assortment, strong multi-channel execution, and a more favorable year-over-year macroeconomic environment drove these better-than-expected results,” said Hubert Joly, Best Buy president and CEO. “We were also able to capitalize on the product cycles in large screen televisions and mobile phones. These two categories were the primary drivers of our year-over-year revenue growth, more than offsetting significant weakness in tablets.”

Best Buy said domestic same-store sales would have risen a more modest 2.6% without a boost from installment billing. This relatively new offering allows mobile phone users to upgrade to the latest smartphone and spread their payments over time, the company said. Those plans are more costly than traditional contracts, which subsidize the cost of a new phone, but keep consumers locked into using that device for two years.

Best Buy, which has faced a tough challenge from online retailers, proved it was able to overcome a short blip in service on its website, which went down briefly on Black Friday. Best Buy said same-store sales climbed more than 13% for the online business for the nine-week period ended Jan. 3, bolstered by higher conversion rates and increased traffic.

Looking ahead, however, Best Buy struck a cautious tone. It said excitement about new mobile phone and TV offerings isn’t expected to continue at holiday levels. As a result, it sees enterprise same-store sales in the first half of fiscal 2016, excluding installment billing, to be flat to falling in the low-single digits.

Sharon McCollam, Best Buy EVP, CAO and CFO, asserted: “We believe that the positive domestic sales trends that we saw in mobile phones and home theater during the holiday period, in addition to the share gains we saw across other NPD-reported consumer electronics categories, were partially driven by the excitement around high-profile products and will not likely continue at holiday levels. As such, while we are excited about these investments and confident in our ability to execute against them, we are also appropriately cautious about the pressures.”